Updated to include comment from Wells Fargo
NEW YORK ( TheStreet) - Wells Fargo (WFC) will pay $75 million to settle a lawsuit with former shareholders of Wachovia, which Wells acquired in 2008, according to Reuters, which cited court documents.
The plaintiffs in the class action case, which included New York City pension funds, claimed Wachovia misrepresented the risk in its mortgage portfolio from 2006 to 2008. Wells settled a related lawsuit with a group of bond investors for $590 million in August.
The investors claim Wachovia executives misrepresented underwriting criteria in its $120 billion "Pick-A-Payment" loan portfolio in an effort to "artificially support" the bank's stock price, Reuters reported.These adjustable-rate mortgages allowed borrowers to make a minimum payment that did not cover all of the interest and principal owed, causing a borrower's balance to increase, Reuters reported. Wachovia took over the loans as part of its acquisition California-based Golden West Financial Corp in 2006, and continued to make them even after the housing market began to sink. Losses grew at the start of 2008, weakening Wachovia and leading to its sale to Wells Fargo at the peak of the financial crisis. Wells does not make Pick-a-Payment loans, according to the report. "We are pleased to move forward with this settlement and put this matter behind us. The settlement amount was accounted for in prior quarters and will have no financial impact," a Wells Fargo spokeswoman wrote in an e-mail message to TheStreet. -- Written by Dan Freed in New York. Follow this writer on Twitter.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV